Question

Nick’s Novelties, Inc., is considering the purchase of new electronic games to place in its amusement houses. The games would cost a total of $320,000, have an fifteen-year useful life, and have a total salvage value of $32,000. The company estimates that annual revenues and expenses associated with the games would be as follows:

Revenues				$	230,000
Less operating expenses:
Commissions to amusement houses	$	80,000
Insurance		20,000
Depreciation		19,200
Maintenance		50,000			169,200
Net operating income				$	60,800

Required:

1a. Compute the pay back period associated with the new electronic games.

Investmet Required/ Annual Net cash inflow =Payback period

????? / ??????= ?Years

Answer 1